Disallowance on ad-hoc basis not justified without pointing out specific expenses being not incurred wholly and exclusively for business
In the instant case, the assessee had challenged the order passed by the CIT(A) in sustaining ad-hoc disallowance of 1/5th of the amount of expenditure incurred on account of advertisement expenses.
ABCAUS Case Law Citation
ABCAUS 3517 (2021) (06) ITAT
The Assessing Officer (AO) compared the advertisement expenses claimed by the assessee with the amount of expenses claimed in the preceding year viz-a-viz turnover.
According to the Assessing Officer, sales of the assessee in the immediately preceding year were higher as compared to the current assessment year, and therefore he disallowed the entire advertisement expenses.
The CIT(A) observed that though the bills were there, however, according to him, entire expenditure of advertisement was not for advertisement of the brand of the assessee, and therefore, he made disallowance of 1/5th of the expenses.
The Tribunal observed that the CIT(A) did not point out which was the specific bill/expenditure, not related to the brand of the assessee.
The Tribunal opined that without pointing out the specific defects in the bills or vouchers or pointing out that same was not incurred wholly and exclusively for the purpose of the business, the CIT(A) was not justified in sustaining the disallowance on ad-hoc basis.
Accordingly, the Tribunal set aside the finding of the CIT(A) on the issue in dispute and deleted the addition sustained by the CIT(A). The ground of the appeal was allowed in favour of the assessee.
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